1. Three yields, three formulas — not to be confused
When people speak of «rental yield», they actually mean three distinct indicators, from the most optimistic to the most realistic. Confusing them is the leading cause of investor disappointment. Here are the three formulas, in the order you calculate them:
- Gross yield = (annual rent ÷ purchase price) × 100. This is the listing figure. It ignores everything that eats into the rent.
- Net-of-charges yield = ((annual rent − annual charges) ÷ purchase price) × 100. You deduct the real charges the landlord bears (vacancy, condo fees, TSC, maintenance, insurance, management).
- Net-of-tax yield (or «net-net») = ((net-of-charges rent − tax) ÷ purchase price) × 100. You additionally deduct rental taxation.
The right denominator is not the property's advertised price but the total cost of the operation: price + registration duties + notary fees + agency fees + initial works. A yield calculated on the purchase price alone is mechanically overstated.
2. Gross yield — simple, but misleading
Take a purely illustrative example (the numbers are rounded for teaching purposes, they are not market data): an apartment bought for 800,000 MAD, rented at 5,000 MAD/month, i.e. 60,000 MAD/year.
Gross yield = 60,000 ÷ 800,000 × 100 = 7.5%
(illustrative example — not a market range)
This 7.5% is the sales figure. It accounts for neither the months without a tenant, nor the charges you will pay, nor the tax. It serves to compare two properties quickly, provided you calculate the gross the same way for both (same denominator). Taken alone, it says nothing about what you will collect.
3. From gross to net of charges — the five forgotten items
This is where the essentials play out. Five items, regularly ignored, turn a flattering gross into a realistic net:
- Rental vacancy. A single month without a tenant over the year already cuts ≈ 8.3% of the annual rent. It is often the heaviest item, and the most understated in «on paper» calculations.
- Non-recoverable condo fees. The share of co-ownership charges that remains with the owner and cannot be re-billed to the tenant.
- The municipal services tax (TSC). Due by the owner on the rental value of the property — a recurring annual item never to be forgotten.
- Maintenance and capex. Small current repairs plus a provision for major works (facade, roof, boiler, refurbishment between two tenants).
- Insurance and management. Non-occupying owner insurance, and management agency fees if you delegate (often a percentage of the rent collected).
Take the illustrative example again. Assume over the year: one month vacancy (−5,000), non-recoverable condo fees (−2,000), TSC (−1,500), maintenance + works provision (−3,000), insurance (−1,000). Total charges = −12,500 MAD. The net-of-charges rent becomes 60,000 − 12,500 = 47,500 MAD.
Net-of-charges yield = 47,500 ÷ 800,000 × 100 = 5.9%
(illustrative example — the 7.5% gross has already lost 1.6 points)
4. From net of charges to net of tax — the 40% abatement and the 5% withholding
Last layer: taxation. In Morocco, rental income benefits from a 40% abatement, and the balance (60% of the income) is subject to income tax (IR) on the progressive scale. Only 60% of the base is taxed after the abatement.
On our illustrative example, the taxable base after the abatement would be 60,000 × 60% = 36,000 MAD, to which the income tax scale applies. Assuming income tax of the order of 5,000 MAD on this income (an illustrative amount, depending on your bracket and your other income), the net-of-tax rent comes to 47,500 − 5,000 = 42,500 MAD.
Net-of-tax yield = 42,500 ÷ 800,000 × 100 ≈ 5.3%
(illustrative example — from the advertised 7.5% gross to the real 5.3% net, the gap is over 2 points)
Watch out for a piece of tax plumbing that changes the timing of your cash flow: from 1 July 2026, a 5% withholding on the rent excl. VAT is levied by the tenant when the tenant is a professional (company subject to corporate income tax (IS), individual under the actual or simplified net-result regime, State, local authorities). This is not an additional tax: it is an advance, creditable against your final income tax. But you now only collect 95% of the monthly rent — a crucial detail if the property is debt-financed.
5. Net yield vs cap rate — two tools, two uses
Professionals do not speak of «net yield» but of cap rate (capitalisation rate). The nuance matters. Rental yield is calculated on the purchase price you paid; the cap rate is calculated on the current market value of the property:
Cap Rate = annual NOI ÷ market value
NOI (Net Operating Income) = rent net of operating charges, before tax and before financing.
The NOI corresponds, in practice, to our net-of-charges rent (step 3) — but excluding personal taxation and excluding the loan instalment, because the cap rate judges the asset, not the investor. The cap rate is mainly used for commercial assets (offices, retail, logistics, hospitality) and portfolio arbitrage; the net-of-tax yield is used to judge the profitability of a residential purchase from your point of view.
Remember: a low cap rate means a high value (and vice versa). Since it rests on the market value, and not on your historical purchase price, the cap rate requires a rigorous estimate of that value — which is precisely the appraiser's job.
6. Calculate your case — and do it with no blind spot
You can reproduce the cascade gross → net of charges → net of tax on your own property: price, rent, charges, vacancy, income tax, exit.
The one link no one can fill in «from memory» remains: the real value of the property and its market rent. Overstating the rent or understating the vacancy means artificially inflating every layer of the calculation. An independent appraisal report compliant with RICS (Red Book) standards documents the market value, the sustainable market rent, the condition of the property and the capex to plan for — the three inputs that decide the result. Cost: from 3,500 MAD excl. tax, report within 5 to 8 days (48-72 h express), firm quote within 24 h.
7. The honest-calculation checklist
- Denominator = total cost of the operation (price + costs + initial works), not the advertised price alone.
- Rent = sustainable market rent, not the seller's hoped-for rent.
- Vacancy = at least a one-month/year scenario; test two months in sensitivity.
- Charges = non-recoverable condo fees + TSC + maintenance/capex + insurance + management.
- Taxation = income tax after the 40% abatement; include the 5% withholding if the tenant is a professional (creditable advance).
- Three results = always show the gross, the net of charges AND the net of tax. A single figure is never the full truth.
8. FAQ
What is the gross rental yield formula?
Gross yield = (annual rent ÷ purchase price) × 100. It is the simplest and most optimistic ratio: it ignores charges, vacancy and taxation. For a rent of 5,000 MAD/month (60,000 MAD/year) on a property at 800,000 MAD, the gross comes to 7.5% — a purely illustrative figure. Better to use the total cost of the operation as the denominator.
How do you go from gross to net of charges?
You deduct from the annual rent all the items actually borne by the landlord: rental vacancy, non-recoverable condo fees, municipal services tax (TSC), maintenance and small repairs, insurance, management fees. Net of charges = (annual rent − annual charges) ÷ purchase price × 100. This step often loses 1 to 3 points versus the advertised gross.
What taxation applies to rental income in Morocco?
Rental income benefits from a 40% abatement, then the balance is subject to income tax (IR) on the progressive scale. The net-of-tax yield deducts this income tax. From 1 July 2026, a 5% withholding on the rent excl. VAT applies when the tenant is a professional (IS company, IR under actual/simplified net-result, State, local authorities): it is a creditable advance, not an extra tax.
What is the difference between rental yield and cap rate?
Rental yield is calculated on the purchase price paid by the investor. The professionals' cap rate is calculated on the current market value: Cap Rate = annual NOI ÷ market value, NOI being the rent net of operating charges before tax and financing. The cap rate serves commercial assets and arbitrage; net yield serves to judge a residential purchase.
Which items are most often forgotten in the calculation?
Five: rental vacancy (one month already cuts ≈ 8% of annual income), non-recoverable condo fees, the municipal services tax due by the owner, maintenance and the capex provision, and taxation (income tax after the 40% abatement, 5% withholding where applicable). Including them shifts a flattering gross to a realistic net.
Your net yield depends on one thing: the accuracy of the inputs.
RICS-certified experts — market value, sustainable market rent, vacancy and capex documented in a report compliant with RICS (Red Book) standards. Within 5 to 8 days (48-72 h express), everywhere in Morocco. 4.9/5 across 47 reviews, over 5,000 appraisals completed.
Note: The figures in this article (rent 5,000 MAD/month, price 800,000 MAD, charges, income tax) are illustrative examples intended to explain the calculation method — they are not market data nor yield ranges observed in Morocco. The tax rates (40% abatement on rental income, 5% withholding from 1 July 2026) fall under the texts in force: confirm your situation with your notary or a tax adviser. To estimate the value and market rent of your property, see our real estate appraisal page or the real estate blog.